Arbitration and Conciliation Act, 1996 – Arbitrator passed an award allowing claims which were submitted after the submission of the final bill (containing No Claims Certificate) by the Respondent-Contractor – During the arbitration, the appellant filed an application u/s.16 invoking clauses 65 and 65A of the Contract which interdicted the submission of a new claim after the submission of the final bill – Application rejected – Petition filed by the appellant u/s.34 challenging the award, allowed – Order set aside by High Court in appeal u/s.37 – Held: When a contractor seeks to wriggle out of a final bill or a ‘no claims due certificate’ which he has submitted, he must establish a case that a final bill or a certificate of no further claims was the result of any of the vitiating factors under the law – Sans such finding, the final bill would stand – If the final bill cannot be overridden by any factors known to law then the clauses relied upon by the appellants in this case would operate – There was no finding by the Arbitrator that the final bill and the no claims certificate were vitiated – The clauses in the contract were binding not only on the parties but also on the Arbitrator – Going against the terms of clauses 65 and 65A would indeed render the Award illegal being contrary to the contract and, therefore, without jurisdiction – If the clauses operate, the inevitable result is the arbitrator could not have traveled outside of the contractual prohibition and passed an award allowing claims submitted after the submission of the final bill – While, the reasoning adopted by the High Court cannot be subscribed to, it cannot also be lost sight of that the amounts in question are fairly meagre and the final bill was settled only after long delay of over an year – It was apparently the long delay in the payment of the final bill amount which led to the raising of the new claims – Perhaps, if the final bill itself was not kept pending for such a long time, the entire dispute may not have arisen at all – Impugned order set aside – Appellants to pay Rs.3 lakhs to the respondent in full and final settlement of its claims – Constitution of India – Art. 136.
Arbitration and Conciliation Act, 1996 – ss.16(2), (3), 34, 37 – Plea of the respondent that the order dtd. 04.03.2009 passed by the Arbitrator u/s.16 had attained finality as the same was not impugned u/s.37 – Held: Under s.37(2)(a), an appeal lies to the Court from an order of the Arbitral Tribunal accepting the plea referred to in sub-sections (2) and (3) of s.16 – This means that an appeal can be preferred against the order of the Arbitral Tribunal allowing the plea that the Arbitral Tribunal does not have jurisdiction – Similar is the case with reference to an order which is rendered appealable u/s.16(3) – Thereunder also, it is the plea that the Arbitral Tribunal is exceeding the scope of its authority which is allowed which is rendered appealable – In the present case, by order dtd.04.03.2009, the Arbitral Tribunal did not allow the plea be it u/s.16(2) or u/s.16(3) – On the other hand, the Tribunal rejected the plea of the appellants – Therefore, no appeal could have been filed u/s.37 against the order dtd.04.03.2009 – An order passed by the Arbitral Tribunal rejecting the plea u/s.16(2) or 16(3) being part of the Award itself, it is open to the parties to challenge the same when a petition is filed u/s.34 challenging the Award. Arbitration – Arbitrator is a creature of the parties and the contract – As Arbitrator he cannot stray outside the contours of the contract – He is bound to act within its confines – A disregard of the specific provisions of the contract would incur the wrath of the Award being imperiled.
Allowing the appeals, the Court
HELD: 1.1 The clauses which have been relied upon by the appellants are clear and unambiguous. What they interdict is the submission of a new claim after the submission of the final bill. If there are any claims left after the submission of the final bill, the parties have agreed that they shall stand waived. These are the clauses which are binding not only on the parties but also on the Arbitrator. Going against the terms of clauses 65 and 65A would indeed render the Award vulnerable on the basis that it is illegal being contrary to the contract and, therefore, without jurisdiction. There may be cases where a final bill may be submitted and the contention is taken that the final bill was submitted under duress. In such a case, it may be open to the claimants to urge and the Arbitrator to find that the final bill was itself vitiated on account of the fact that it was brought about by duress or any other vitiating factors under law. If such an event had taken place then that may have been sufficient to non-suit the appellants. In other words, if under the terms of the agreement, there is an embargo against the Arbitrator embarking upon and attempting to find merit in any claim which is not part of the final bill, an award so countenancing a claim would be illegal. However, on the other hand, if the case is that the final bill itself should not be given life as it was born out of coercion or any other vitiating factor and the Arbitrator renders a finding on material as is sufficient in law then the Award of the Arbitrator may not be attacked on the ground that he travels beyond the contractual provisions. [Paras 17, 18][822-G-H; 823-A-D]
1.2 On 13.02.2002, the respondent has indeed submitted a final bill. It is a year thereafter on 25.02.2003, that the respondent sent a letter inter alia urging that the final bill dated 13.02.2002 was not paid and is signed under protest. Subsequently, it would appear that the respondent has filed an affidavit on 24.05.2003. It is ignoring all this that notice was sent for referring the matter to arbitration. By order dated 12.11.2007, the High Court proceeding under Section 11 of the Act appointed an Arbitrator. During the course of the arbitration, on 03.08.2008, the appellants filed an application under Section 16 of the Act invoking clauses
65 and 65A of the Contract. The said application came to be rejected on 04.03.2009. The Arbitrator has proceeded to reject the application filed by the appellants under Section 16 on the basis of the order dated 12.11.2007 passed by the High Court. The Arbitrator further draws inspiration from the fact that the application seeking modification of the order dated 12.11.2007 was dismissed on 04.12.2007. The Arbitrator further found that the agreement entered into between the parties subsequent to the order dated 12.11.2007 would indicate that disputes indeed exist. What is, however, conspicuous by its absence is any finding by the Arbitrator, that the final bill dated 13.02.2002 was the result of duress or any other vitiating factors. [Paras 19, 20][823-E-H]
1.3 An appeal lies to the Court from an order of the Arbitral Tribunal accepting the plea referred to in sub-sections (2) and
(3) of Section 16. This means that an appeal can be preferred against the order of the Arbitral Tribunal allowing the plea that the Arbitral Tribunal does not have jurisdiction. Similar is the case with reference to an order which is rendered appealable under Section 16(3) of the Act. Thereunder also, it is the plea that the Arbitral Tribunal is exceeding the scope of its authority which is allowed which is rendered appealable. In this case, by order dated 04.03.2009, the Arbitral Tribunal has not allowed the plea be it under section 16(2) or under Section 16(3). On the other hand, the Tribunal has rejected admittedly the plea of the appellants. Therefore, no appeal could have been filed under Section 37 against the order dated 04.03.2009. An order passed by the Arbitral Tribunal rejecting the plea under Section 16(2) or 16(3) being part of the Award itself, it is open to the parties to challenge the same when a petition is filed under Section 34 of the Act challenging the Award. This is the scheme of the Act. This is apparently to confine a right to appeal to those cases where accepting a plea of a party would bring the arbitration to a halt. In fact, the order dated 04.03.2009 has been referred to in the Award and it has been treated as part of the Award. It is thereafter that in a proceeding that the District Court has allowed the petition filed under Section 34 by the appellants. It is no doubt true that the salutary principle which has been enunciated by this Court in Central Inland Water Transport Corporation being in accord with constitutional principles must receive due consideration. However, it cannot be torn out of context. More importantly, as already noticed when a contractor seeks to wriggle out of a final bill or a ‘no claims due certificate’ which he has submitted, as in a civil Court so before the Arbitrator, he must establish a case that a final bill or a certificate of no further claims was the result of any of the vitiating factors under the law. Sans such finding, the final bill would stand. If the final bill cannot be overridden by any factors known to law then the clauses relied upon by the appellants in this case would operate. There is no finding by the Arbitrator that the final bill and the no claims certificate were vitiated. The clauses in the contract were binding on the respondent. It cannot be departed from invoking the principle in Central Inland Water Transport Corporation. It is not the case of the contractor that when the contract was entered into, it was in circumstances which attracted the principles laid down therein. If the clauses operate, the inevitable result is the arbitrator could not have traveled outside of the contractual prohibition and passed an award allowing claims which were submitted after the submission of the final bill. [Paras 22, 23, 25 and 26][824-F-H; 825-A-B; 826-A-D]
Central Inland Water Transport Corporation & Anr. v. Brojo Nath Ganguly AIR 1986 SC 1571 : [1986] 2 SCR
278 – referred to.
1.4 While this Court cannot subscribe to the reasoning adopted by the High Court, it cannot also be lost sight of that the amounts in question are fairly meagre and the final bill remained unpaid for long period of time. It was apparently the long delay in the payment of the final bill amount which led to the raising of the new claims. Perhaps, if the final bill itself was not kept pending for such a long time, the entire dispute may not have arisen at all. Having regard to all the facts and circumstances, while this Court is inclined to set aside the impugned order, the interests of justice would require that the respondent is paid a lumpsum amount in full and final satisfaction of all his claims. The impugned judgment is set aside. However, the appellants will pay a sum of Rs.3 lakhs (Rupees Three Lakhs only) to the respondent which will be in full and final settlement of the claims of the respondent. [Paras 28, 29][826-G-H; 827-E]
Bharat Coking Coal Ltd. v. Annapurna Construction (2003) 8 SCC 154 : [2003] 3 Suppl. SCR 122; Union of India and Others v. Master Construction Company (2011) 12 SCC 349 : [2011] 5 SCR 853; Union of India v. Parmar Construction Company (2019) 15 SCC 682 : [2019] 5 SCR 1009; PSA SI CAL Terminate (P) Ltd. v. Board of Trustees of V.O. Chidambranar Port Trust Tuticorin 2021 SCC Online SC 508; Union of India and Others v. Master Construction Company (2011) 12 SCC 349 : [2011] 5 SCR 853; National Insurance
Company Limited v. Boghara Polyfab Private Limited (2009) 1 SCC 267 : [2008] 13 SCR 638; SBP & Co. v. Patel Engineering Ltd. and Another (2005) 8 SCC 618 : [2005] 4 Suppl. SCR 688; Tahera Khatoon (D)By LRs. v. Salambin Mohammad (1999) 2 SCC 635 : [1999] 1 SCR 901 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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